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Michael D. Duffy

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Farmland Ownership

AgDM Newsletter
December 2008

Farmland is Iowa’s most precious natural resource. Not only does it represent the basis for our agricultural production, farmland represents over a $100 billion dollars of wealth in the state of Iowa. Who owns Iowa’s farmland and how it is farmed are important questions for the future of the state.

Currently there is a major trend underway in Iowa farmland ownership. We are witnessing a significant increase in the amount of land owned by people over 65 years of age. This major trend is leading to several other changes, all of which will have a significant bearing on who owns Iowa farmland in the future.

Iowa State University conducts a survey of Iowa farmland ownership every five years. The most recent survey was conducted in late winter and early spring of this year. The results have just been released.

In 2007, 28 percent of Iowa’s farmland was owned by people over the age of 75. Another 27 percent of the land is owned by people between 65 and 74. This means that over half (55 percent) of the land in Iowa is owned by people over the age of 65. In 1982, only 29 percent of the farmland was owned by people over 65.

One question often asked is whether or not this is a significant new trend or if Iowa has always experienced ebbs and flows in farmland ownership with respect to age. Unfortunately it is not possible to directly compare the modern surveys with some of the older ones because the older ones were based on the percent of owners, whereas the more recent surveys are based on the percent of land.

Although direct comparisons aren’t possible, some studies show that it is not unreasonable to assume the percent of owners is equivalent to the percent of acres. With that assumption we can make historical comparisons. From 1890 to 1930 approximately one-third of the land was owned by people over 65. Then, during the 1930s, the Great Depression era, approximately 40 percent of the land was owned by people over 65 years of age. Following WWII, the percent of land owned by people over 65 returned to approximately one-third as found before the Depression. In 1982, there was 29 percent of the land, approximately one-third, held by people over the age of 65.

This situation has changed dramatically and shows every sign that it will continue for some time into the future. The percentage of land owned by those over 75 years of age has more than doubled in the past 25 years. In 1982, 12 percent of the farmland was owned by those over 75, now it is more than double that amount.

If we use normal life expectancy, we can expect to see over 25 percent of Iowa’s farmland change ownership over the next decade. The changes that can be attributed to this turnover in land ownership have already started to manifest themselves. But, before discussing a few of them it is interesting to note the impact of gender on land ownership.

Gender

A little over half (53 percent) of the farmland in Iowa is owned by males and 47 percent by females. When we look closer at these numbers, 40 percent of the farmland is owned by couples. In these cases we assumed the land was equally divided between the husband and wife.

Land owned by a single owner is also approximately 40 percent of Iowa’s farmland. It is ironic that this land is divided equally between males and females. Thus, 20 percent of Iowa’s farmland is owned by a single male and another 20 percent of the farmland is owned by a single female.

The remaining 20 percent of Iowa’s farmland has multiple owners. The majority of these owners are males. Males own 13 percent of Iowa’s farmland in multiple ownership and females own 7 percent of the land in multiple ownership arrangements.

The aging land owner population is especially evident when viewed from the perspective of gender. In 2007 women were the sole owners for approximately 20 percent of the land in Iowa and, of these women, over half, 53 percent, were over the age of 75. That means that approximately 10 percent of the land in Iowa, 1 acre in every 10, is owned solely by a woman, over 75 years old.

Anticipated land transfer methods

One of the issues raised by the increasing amount of land owned by those over 75 is how the land will be transferred to the next generation. In 2007 owners indicated that approximately two-thirds, 63 percent, of the land would be moved within the family through inheritance, gifts or sale.

Transferring the land has always been a difficult issue because the land represents the majority of farmers’ assets and, in most cases, it represents the business. Keeping the business viable, maintaining retirement income and security, treating all the children equally are a few of the goals farmers often try to achieve with their land.

The land appears to be divided mostly amongst the offspring. From 1982 to 2002 there was a marked decrease in the amount of land held as sole proprietor and an increase in the amount of land held in multiple owner fashion.

Iowa farmland ownership by type of owner did not change dramatically from 2002 to 2007. But, with the perspective of a longer time period we can see the changes. From 1982 to 2007 the amount of land owned by a sole owner dropped from 41 to 29 percent. One method of ownership that has increased is trusts. In addition, owners indicated that, in 2007, 18 percent of the land would be transferred via a trust, this was up from just 6 percent who indicated using a trust in 1982. Another change is the amount of land that is held using multiple ownership methods. For example, a recent Iowa auction of 200 acres listed two revocable trusts, one family trust, a charitable trust and an individual as owner. Such multiple ownership types are becoming increasingly apparent in Iowa farmland.

Absentee owners

The residence of the farmland owner determines where they spend their income and pay taxes. This in turn influences the economic activity of the state. If a landowner does not live in Iowa then the income to the land will leave the state.

A trend related to age and multiple ownership is a trend in Iowa towards more ownership by non-residents. In 1982, only six percent of the land was owned by people who either didn’t live here or only lived in Iowa on a part-time basis. In 2007, 21 percent of the land is now owned by people who don’t live in the state. This included 14 percent of the land owned by non-residents and 7 percent that is by part-time residents.

A majority of the owners, 56 percent, live on a farm. This means that 44 percent do not. The percentage of land owned by those who do not live on a farm has increased seven percent since 1982.

Rented acres

The percentage of farmland rented in Iowa has not significantly changed over the past few decades. In the coming years one would expect the percent of land rented to increase. An increase in age of owner, an increase in out of state owners, and an increase in multiple owners all point towards an increase in the amount of land that is rented. There are some mitigating factors, such as increasing age of farmers, mechanization and so forth, nonetheless, one would expect rented acres to increase over time.

One dramatic change that has occurred is the method of renting. Basically landowners have one of two types; cash rent or crop share. In 1982, the rented acres were equally divided between cash rent and crop share rent. In 2007, however, this had changed dramatically with 77 percent of the rented acres now cash rented and 22 percent crop shared.

There appears to be two driving forces towards more cash rent. One is the changing nature of land ownership. An out of state owner is not likely to be interested in being paid a bushel of corn in Iowa. Similarly the nature of farming is also leading the increase in cash renting. As one person has more landlords it is easier to keep track of a cash rent as opposed to shares. Cash renting land has become so popular that there are actually more acres cash rented than there are farmed by the owner.

Changing land ownership

Iowa farmland ownership is changing and all indications are that it will continue to change for the foreseeable future. It is hard to predict exactly what this change will mean.

But one thing is certain we will continue to see a more dispersed ownership and increase in concentration of the management of the land.

As Iowa prepares for its future, knowing and understanding the trends in land values will be important. Who will farm the land and how will it be farmed depend on our understanding of ownership trends.